Assignment2 Cost Classification & Pricing
Cost Classification and Pricing
Student Name
Student University
Cost and Price Analysis
Cost Classification and Pricing
Cost Classification
According to Maher, L. (2005), cost classification refers to the separation of different expenses in various categories. The classifications of costs are required for any firm in order to accurately track and account for the allocation of varies types of cost categories. For Hawk-eye, cost classification is crucial since it plays an important part in determining the price of the navigation system. The total overall cost of the navigation systems shares a direct relationship with all indirect and direct cost associated with the end product. For example, the price shall be inclusive of manufacturing, marketing, research and development expenses. Below are the categories of costs for Hawk-eye:
Reasonable cost
Reasonable cost refer to the cost that given its quantity and nature and is comparable with what any other reasonable company will incur provided it is in the same industry and operating under similar circumstances (Thomas, 2012). Hawk-eye’s cost reasonableness would be transparent to the government, and shall not fall outside of what any prudent person would reasonably pay for a similar item.
Allowable cost
Allowable cost, are the cost that are used in connection with contracts and grants that are sponsored by the federal government. Such costs include salaries as well as fringe benefits, supply of materials, capital equipment, and maintenance/service agreements. Hawk-eye will have a Defense Contract Audit Agency (DCAA) approved Cost and Accounting Standard whereby all allowable cost will have a clear audit trail.
Allocable cost
A cost is said to be allocable if the involved goods and services can be assigned to the particular project that is sponsored in line with the benefits that the project receives. For instance, if a cost is fully charged to a project that is sponsored, the project has to be the
Student Name
Student University
Cost and Price Analysis
Cost Classification and Pricing
Cost Classification
According to Maher, L. (2005), cost classification refers to the separation of different expenses in various categories. The classifications of costs are required for any firm in order to accurately track and account for the allocation of varies types of cost categories. For Hawk-eye, cost classification is crucial since it plays an important part in determining the price of the navigation system. The total overall cost of the navigation systems shares a direct relationship with all indirect and direct cost associated with the end product. For example, the price shall be inclusive of manufacturing, marketing, research and development expenses. Below are the categories of costs for Hawk-eye:
Reasonable cost
Reasonable cost refer to the cost that given its quantity and nature and is comparable with what any other reasonable company will incur provided it is in the same industry and operating under similar circumstances (Thomas, 2012). Hawk-eye’s cost reasonableness would be transparent to the government, and shall not fall outside of what any prudent person would reasonably pay for a similar item.
Allowable cost
Allowable cost, are the cost that are used in connection with contracts and grants that are sponsored by the federal government. Such costs include salaries as well as fringe benefits, supply of materials, capital equipment, and maintenance/service agreements. Hawk-eye will have a Defense Contract Audit Agency (DCAA) approved Cost and Accounting Standard whereby all allowable cost will have a clear audit trail.
Allocable cost
A cost is said to be allocable if the involved goods and services can be assigned to the particular project that is sponsored in line with the benefits that the project receives. For instance, if a cost is fully charged to a project that is sponsored, the project has to be the
References: Maher, L. (2005). Fundamentals of Cost Accounting, 1st (ed). New York: McGraw-Hill Maskell, B. (2003) Practical Lean Accounting. Productivity Press. 43 (1): 39-43 Thomas, N. (2012). The Strategy and Tactics of Pricing. Upper Saddle River, New Jersey: Prentice Hall